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CHAPTER ONE
INTRODUCTION TO FINANCIAL
ACCOUNTING
Definition of accounting
Accounting information
What is information?
Financial Accounting
• It describes financial resources, obligations and activities of an economic activities
• it helps investors and creditors to make decisions
• it also helps managers and others
• in fact it is used for many purposes “general purpose”.
Managerial Accounting
• It involves the development and interpretation of accounting information intended to
assist management in operating the business.
• it helps to set overall goals, to evaluate performance, to decide to introduce new line
of product, etc
Tax Accounting
• Financial accounting information is a base to prepare tax return
• This information, however is adjusted or reorganized in line with the income tax reporting
requirements
1) Income Statement
Inputs Process Outputs 2)
3)
Balance Sheet
Cash Flow
1. Accounts
2. Journal
3. General
Ledger
4. Trial Balance
Financial
Statements
Based on
Historical in
General Purpose
Nature
Assumption